The Constitution imposes on each German the duty of work. It is not sufficient in modern states, especially in one defeated in war, that every one therein merely work, unless this work is directed in a certain spirit, following a given plan and toward a determined end. The fundamental idea that inspired the Constituent Assembly in the last provisions of its work is as follows: The whole German system of economy, public and private, is destroyed or demolished by the war. Germany cannot dream of rising from its ruins unless it realizes immediate and radical reforms. It must completely reconstruct its former economic system. The whole country must become an immense enterprise directed by a conscious will aimed at a definite goal. All the forces of the country solidly organized and scientifically utilized must be so managed that a maximum of production will be assured.

To this end, two series of reforms are contemplated. They are summed up in these words, “councils” and “collective economy.” On the one hand, there is projected an Economic Constitution, whose organs are progressively destined to be parallel to those of the political Constitution. On the other hand, the effort is made to realize in the organization of production and distribution an economic system that is intermediate between that of private economy on the one hand, and a purely socialist rÉgime on the other.

Nothing systematic, however, has as yet been achieved. The ground is new. Surprised by the Revolution, the theoreticians of new systems have not yet fixed their schemes nor elaborated complete and coherent plans. On the other hand, the majority of the National Assembly is formed by a coalition of parties whose economic conceptions differ still more than do their political conceptions. This lack of definiteness and these differences endanger all effective realization of a solution. But the necessity of reforms has made itself imperatively felt and economic difficulties are so grave and menacing that they cannot wait indefinitely for solution. Further, there are very many people who are restive and who do not hesitate to resort to general strikes and even to revolts, when governments hesitate too long in effecting a reform from which they hope an amelioration of their lot. That is why one will look in vain for a plan as a whole or a logical order in the provisions we are about to study. Most of them were adopted by an assembly uncertain of the work it should do, one which went about its tasks most hurriedly and obeyed the pressure of external forces more powerful than itself.

SECTION I
THE ECONOMIC CONSTITUTION

The Economic Constitution rests wholly on the idea of the Councils. It is recalled[57] that the system of the Councils, even under the parity principle which the supporters of the Vocational Parliament wished to give it, was left out of the political Constitution but is included in the Economic Constitution, for which it forms the framework.

1.—THE “ANCHORAGE” OF THE COUNCILS IN THE CONSTITUTION.

Before the Revolution, said the Socialists and Trade Unionists, there was in Germany neither political autonomy nor economic autonomy. Just as in their political life the people were governed by a coterie of junkers and bureaucrats, so in their economic life the people were under the absolute domination of the entrepreneur. This autocracy of the capitalists expressed itself legally in the fact that the conditions of work were fixed solely by the employers. The omnipotence of the latter was, however, modified by the collective bargains concluded between them and the trade unions. While it is true that these agreements or bargains did not have legal guarantees, nevertheless thanks to the existence of workingmen’s organizations there was instituted by means of these agreements a contractual and coequal workingmen’s right.

The Revolution of 1918 introduced in Germany political democracy. The republican government in its establishment has even taken several steps along the road of economic democracy. Reforms, such as the granting of complete liberty of organization, the abolition of ordinances on wages and exceptional laws against agricultural labourers, and the protection of workers and salaried employÉs against arbitrary discharge, certainly mark interesting progress.

But the Socialists, followed on this point by the National Assembly, held that these reforms were only preparatory in character. True economic democracy can not content itself with the mere recognition of workers’ organizations and collective bargaining. Economic democracy cannot be established and therefore economic and social transformation cannot be effected, unless the working class can exercise on production the influence that is its due. There must be provided an organization that accords the workers the right to participate actively in the determination of the ends and of the duties of the vocation and the enterprise; which makes of the workers co-operators with the capitalist. There must be in every district, in the states and in the Reich an economic representation created, in which workers and employÉs will be represented by the side of their employers, and in which, on a footing of equality, they will be called upon to co-operate in the regulation of all economic questions. Such is the thesis; and all efforts and struggles which we shall observe, centred about the problem of according to the working class the right of codecision (Mitbestimmungsrecht); and about the problem of organizing this right. But so far nothing has been done beyond the statement of some indefinite principles and the roughing out of the first measures of their realization.

These problems were not new. Already before the war the law of 1891 provided for “Committees of Workers” in the factories, who could be consulted on the provisions of factory regulations; but as the formation of these committees depended entirely on the good-will of the employers, the workers looked with little sympathy on this institution. In fact, such committees existed in several thousand factories, but their activity was limited to the administration of the income from fines and the institution of welfare work.

During the war the rÔle of the workers increased considerably in importance. The laws for compulsory patriotic service which took away from them the liberty of work owed them compensation. There were established therefore in all enterprises where there were more than fifty employed, “committees of workers,” which were elected by all the workers and had definite functions. There were in addition “joint arbitration committees,” where conflicts between employers and employÉs were settled. “Committees on decisions” also existed, charged with ruling on other questions raised by the law for patriotic service. These different organisms at once assumed an important place in the economic life.

On the advent of the Revolution the unions easily obtained some reforms for which they had fought for a long time, and which constituted their immediate claims.

On November 15, the unions concluded an agreement with the employers’ associations, which has served as the basis of an important development, begun on that date and known as the “labour board” (Arbeitsgemeinschaft). The Arbeitsgemeinschaft appeared several months before the end of the war, but assumed a rÔle of prime importance in the new organization of economic Germany.

The Arbeitsgemeinschaft has been defined as “the combination of big associations of employers and of workers for the regulation of reciprocal relations between employers and workers and for the solution in common of all economic and social questions touching industry and labour.”[58]

The essential principle of the Arbeitsgemeinschaft is that of parity. In the agreement of November 15, the labour unions are recognized as the vocational representatives of the workers. The most complete liberty of organization is accorded them. The agreement specifies as its practical tasks the feeding of veterans, the distribution of raw material, and the regulation in common of labour disputes. For the settlement of pending questions there was organized a special committee composed one-half of employers and one-half of workers.

Several days later, December 4, 1918, there was drawn up the “statutes of the Arbeitsgemeinschaft of the employers and employÉs of Germany.” All German industries were divided into a certain number of groups, which had common organs composed half of employers and half of workers, each elected by their respective organizations. There was in addition a central council, which was the Arbeitsgemeinschaft of all the employers and organized workers of all German industries. Its members were elected by the groups from their membership; and these in turn elected a Central Committee, which executed the decisions of the Central Council.

All these organs—and this point must be emphasized—were composed half of employers and half of workers. The parity principle is at the basis of the whole organization of the Arbeitsgemeinschaften. Thus all economic and social questions concerning industry and labour were regulated by committees in which the employers’ associations and the labour unions were each represented by one-half in each committee. The Arbeitsgemeinschaft is a treaty of peace.

In addition on December 23, 1918, the Commissars of the People signed a decree “on collective agreements, workers and employers committees, and the arbitration of labour disputes.” This decree[59] maintained the committees which were developed during the war by virtue of the law for patriotic service, and increased their powers. Here, too, the whole mechanism rested on the parity principle. According to this decree, committees of workers and employers had to be organized in all industries, in all the administrative bodies and in all offices where there were at least twenty labourers or employÉs. These had as their mission the protection of the economic interests of labourers and employÉs against employers in the factories, administrative bodies and offices. The committees had to supervise in co-operation with the bosses the carrying out of the various provisions in the collective contracts. In factories where there was no collective contract the committees were supposed to co-operate in the regulation of wages and other conditions of labour in agreement with the economic representatives of the workers and employÉs. It was their task, in addition, to maintain good relations among the workers, as well as between the workers and employers.

It would seem that an evolution thus commenced could have continued normally and without difficulty, and that economic and social problems raised by the reorganization of Germany could thereafter be regulated by the Arbeitsgemeinschaften; that is to say, by direct agreement between employers associations and labour unions. But the problem was peculiarly complicated by the introduction and rapid diffusion in Germany of Russian revolutionary ideas. The Soviet differs essentially from the committee above described. Whereas in the latter employers and employÉs are placed on terms of equality and the committee itself becomes a purely economic institution, the Soviet, according to the Russian conception, is a political organization, whose purpose is to eliminate the employers and to establish the dictatorship of the proletariat. The Soviet must have in its hands all the political and economic power of the State.

As to this conception of the political omnipotence of the Council, we have seen that powerful opposition ensued on the morrow of the Revolution and that in January, 1919, the Social Democrats remained in full control of power after having eliminated the Independents. We know that this struggle continued, however, and it will be recalled what organizations the Independents provided for and wished to institute in order to assure to the Workers Councils the political sovereignty they claim. Parallel to the political struggle between the Social Democrats and the Independents, there developed another, on the economic field, between the Trade Unions and the Councils, which found themselves in conflict as much over what reforms should be demanded by the working class as over the rÔle these two groupings should respectively retain in the struggle for the recognition of their claims.

The Trade Unions declared themselves satisfied with the agreement they had concluded with the employers, as well as with the decree of December 23, 1918, which Legien, President of the General Confederation of Labour, called “The Great Charter of Labour.” They were convinced that thereafter there was nothing more to do but to wait for time to develop logically and peacefully the rÔle of the Arbeitsgemeinschaften and of the Committees provided for by the decree of 1918. They did not believe that in this evolution there was any room for Councils. It was they, the Trades Unions, that had theretofore been the only ones to occupy themselves with economic questions, and they did not propose to permit special groups, operating in isolated factories, to deprive them of their traditional mission. Legien in particular did not want to hear any talk of the Councils. They did not seem to him to be able to “incorporate themselves in the actual hierarchy of the organizations and agencies of the workers.” He protested against any concession to the system of Councils, and declared that the only organisms in position to defend the economic interests of the working class, were the Trades Unions.

But an increasingly important part of the working class, attracted by the ardent propaganda of the theoreticians of the Councils system, physically and mentally depressed by misery and unemployment, irritated by the mistakes of the Cabinet and disillusioned by the impotence of the Assembly of Weimar, rallied to the doctrines of the Councils. The Trades Unions were no longer believed by them able to lead the battle which would assure to the workers the preponderant rÔle which should be theirs in economic matters. They showed during the war, co-operating with the militarists and the bureaucrats of the Empire, that they were always ready to compromise. They were directed by veritable functionaries, whose whole careers developed within the Trades Union administration and who had no qualification for representing the working class. In order to secure what the working class wants these claims must be taken in hand by organs issuing directly from the workers—militant organizations in position to lead a swift energetic fight—these organs being the Workers Councils. The Councils must be placed above the unions, and it is to them that belongs the right to decide on the campaigns that should be waged.

Between these two opposite conceptions there arose an intermediate theory. The trades unionists of the later school and the Christian Trades Unionists, energetically as they rejected all economic dictatorship by the Councils, held, however, that there is something just and legitimate in such theories. Giesbert, who holds an important situation in the Christian Trades Unions and who was to be Minister of Posts, wrote in April: “We have not sufficiently appreciated and above all we have realized too late the degree of sound truth in the idea of the Councils. The reason for this is that this idea has come to us from Russia as a political conception, and also because it arrived accompanied by all the tragic manifestations of the Russian Revolution. If the system of Councils assures to the workers the right to participate more completely in the organization and development of economic life, then it cannot help but contribute, if this is done in a reasonable manner, to the reawakening of the love of work and the establishment of a close community of interests between employers and employÉs.”[60]

As for the Cabinet, it declared itself from the first against the Councils, and in an official communication on February 26, 1919, Scheidemann, President of the Council of Ministers, declared that the Cabinet never considered the introduction of the Councils System in Germany, and that above all, if any part should be accorded the Councils, it could only be that of an intermediary between the employers and the trade unions.

But it soon became impossible for either the Cabinet or the Trades Unions to remain in this almost completely negative position; for the struggle for the Mitbestimmungsrecht ceased to be merely a debate among theoreticians. At the beginning of March the workers in the metallurgical industry declared a general strike in Berlin; and in April the miners of Central Germany did the same.

The Cabinet found itself forced to modify its point of view. Receiving at Weimar a delegation of strikers come to present an ultimatum to him, Scheidemann recanted the communication of February 26, and engaged himself by a written promise to effect the recognition of the principle of Councils in the Constitution.[61] One month later he fulfilled his promise. On April 5, a new note made known under what conditions and to what extent the Cabinet envisaged the possibility of organizing and utilizing the Councils. He proposed to inscribe in the Constitution an article proclaiming in general terms the right of workers to participate in common and on equal terms with employers in the regulation of questions of wages and work, as well as in the development of the forces of production in the common economic interest. By the side of special Workers Councils there were to be mixed Councils which would have general economic authority.

On their side the Trades Unions also found themselves obliged to seek a working basis, and they concluded by agreeing to the introduction of Councils in German economic life, on the condition that a very sharp separation be marked between the powers of the Factory Workers Councils and the Economic Councils on the one hand, and those of the Trades Unions themselves on the other. Another condition was that assurance must be given the Trades Unions that the Workers Councils would fulfil their mission in accord with the Trades Unions. At the Congress of Nuremberg, July, 1919, the Trades Unions engaged themselves to use their whole influence to secure for the workers and employÉs the Mitbestimmungsrecht in the various industries and to help the Factory Workers Councils to play an effective part.

2.—CONSTITUTIONAL PROVISIONS RELATIVE TO THE COUNCILS.

It was agreed, then, to recognize for wage-earners and salaried employÉs the right of co-operation in the conduct of industries and that all parties to the productive organization of the nation must co-operate in the regulation of economic questions. This idea is developed and in part realized in the provisions of Article 165, which form the foundation of the future Economic Constitution.

The Constitution sets forth the idea that the economic organization of the country must pursue two different courses and should therefore have two different series of organs—the “Workers Councils” and the “Economic Councils.” This double organization is based on considerations that were expressed by Member of the Assembly Sinzheimer at the session of the National Assembly on July 21, as follows: “In economic life there is both a conflict and a community of interests. The conflict that exists in our economic life and which it is impossible not to perceive is the conflict between capital and labour. It is therefore necessary, since the employers are already represented publicly in Chambers of Commerce, etc., that the side of labour should also receive special public representation which should include all wage-earners and salaried employÉs. The mission of this representation should be to express all the interests of the working class, as such, in an organized manner, through a public organ of representation. This public organ of representation is the Workers Council. This Council is a unilateral representation of interests. It has as its purpose the increase and realization of the economic influence of the working class. But in economic life there is not only a conflict, there is also a community of interest. The latter is based on the common interest in production on the part of both employer and employÉ. The Economic Councils have as their mission, in contrast to the Workers Councils, to realize these common ‘duties of production,’ that are equally incumbent upon employers and employÉs. They must satisfy all the interests of production and bring into co-operation for production all the elements that participate in it, to increase production, diminish its costs and to regulate it as far as possible according to considerations of social good.”

Workers Councils are: Factory Workers Councils, for each establishment; District Workers Councils, organized for each economic district; and the National Workers Council, whose authority extends over the whole German territory. These Councils have as their mission the safeguarding of the social and economic interests of the workers.

The Economic Councils are organized according to a geographical division. They consist of District Economic Councils and the National Economic Council. The former consist of the union of District Workers Councils with the corresponding representatives of the employers and other interested classes of the population. The National Economic Council consists of the union of the National Workers Council with the corresponding representatives of the employers and other “interested classes of the population.” The Constitution does not state precisely what is to be understood by this last expression. In the Constitutional Committee it was unanimously agreed that the consumers shall be particularly represented in the Economic Councils. The creation of these Councils is obligatory and legislators are bound by the Constitution to enact the necessary laws to this effect.

In addition there may be created “autonomous bodies” (Article 156, par. 2) the administration of which is incumbent upon Economic Councils organized not by regions but by industries. Unlike the regional Economic Councils, the creation of these autonomous bodies is only optional; they must be organized, says the Constitution, “in case of urgent necessity.”

The Constitution specifies with a little more detail than for the Workers Councils, the powers of the future Economic Councils. These have for their purpose, in addition to general economic duties, to co-operate in the execution of socialization laws. In addition the Economic Councils of the autonomous bodies are charged with the administration of enterprises placed under the economic collectivity, such as coal, potash, etc.[62]

Finally, the National Economic Council must have certain political functions, and thereby the Constitution makes concession to the supporters of the institution of an Economic Parliament. The solution adopted constitutes a middle ground between the views held by the latter and those of the partisans of a purely formal democracy. It gives to the National Economic Council a certain political influence, but it does not accord it absolutely any power of execution. It has the right to be heard on all bills of social and economic character before they are presented to the Reichstag by the Cabinet. It has, in addition, the right itself to propose laws on social and economic matters, and the Cabinet is obliged, even if it does not approve of these projects, to take them before the Reichstag. It may only present its own point of view as opposed to that of the Economic Council. Finally, the latter may send a representative from among its members to present its proposal before the Reichstag. The situation of the Economic Council is, on the whole, on the social and economic field very analogous to that of the Reichsrat.

The existence and the activity of free vocational associations, that is to say, the unions of workers and employers, are not affected by the institution of Councils. Article 165, par. 1, expressly recognizes vocational organizations of workers and employers. In theory the spheres in which the Councils and these organizations respectively move are distinct, and the differences between them naturally result from the difference in the aims of the two organizations. After the Constitution, as well as before, these unions of employÉs and workers had as their function the regulation of the conditions of labour and of wages with the aid of collective agreements; whereas the Workers Councils and the Economic Councils are concerned with questions other than the contractual determination of the conditions of labour and wages. But we shall soon see that in practice this separation is extremely difficult to maintain and that it gives rise to considerable difficulties between the Councils and the unions.

3.—FACTORY WORKERS COUNCILS.

I.—Of the different organisms provided by the Constitution, which shall be created first?

Some wanted to start from above. They wanted, said these, to organize first the National Economic Council, and to charge it immediately with the important functions attributed to it by the Constitution, as in the conditions prevailing in Germany at present these powers should not remain without titular direction. They desired also that the National Economic Council prepare and propose the bills necessary for the organization of inferior councils. In other words, the National Economic Council was asked to be the Constituent Assembly for the future Economic Constitution.

Others wanted to commence from below, so as to erect the edifice progressively, and not to construct an upper story before the one below it was sufficiently built to afford a solid foundation.

It was the latter opinion that prevailed. On August 9, 1919, the Cabinet announced a bill creating the Factory Workers Councils. It was urgent, said the Cabinet, that these Councils be created first, because there already existed in many enterprises Workers Councils; some of them had been created by the provisions of collective contracts, others by the will of the workers which had made itself felt during the Revolution, but both kinds of Workers Councils lacked altogether a legal standing.

The bill expressed the idea that the power, hitherto accorded to the Committees of Salaried EmployÉs and Wage-Earners should be transferred to the Factory Workers Councils, but that these powers should be considerably enlarged. This bill was such as could be expected from a Cabinet in which there co-operated, in addition to the Social Democrats, the Centre and Democrats. It corresponded to the economic and social ideas of the trade unionists of all shades, ideas evolutionary and not revolutionary.

From Right and Left the most strenuous criticisms were directed against this bill.

The employers recognized that it was necessary to institute workers representation in each industry and enterprise, and they accepted the creation of the Councils, in which both employers and workers would be represented, which would discuss questions of work and wage, which would supervise the execution of collective bargains and which would serve as an intermediary between the workers and the bosses. But they energetically rejected all measures that, under more or less roundabout devices, tended to recognize for the workers any right of control whatever over production or the management of enterprises, since merchants and manufacturers must above all have freedom of operation. They protested energetically against all provisions that gave the Councils the right to intervene in the direction of business, in questions of hiring and discharging; just as they rejected the proposals that the workers be allowed to participate in the consideration of new technical methods, and that they, the employers, must submit their balance sheets to the workers, reveal the amounts of their profits or their losses and admit workers as members in the Administrative Council.

The supporters of the pure doctrine of the Councils, on the other hand, criticized the Cabinet’s proposal for the opposite reason, because it did not organize the real workers representation, but only Councils in which the employers and the workers have the same right. It is impossible to conciliate labour and capital, said they; for, the co-operation of these two must inevitably end in the domination, by the employers, of the workers. The Councils must be made up exclusively of workers who would have an absolute right to control production. The powers given by the bill to the Councils were illusory; they would be only petty unions. The regulation of production would remain intact as before. These Councils would be allowed to examine once a year the balance sheets of each establishment, but they could not control the direction of its business, its purchases, its selling or its profits. The only real advantage would consist of being able to discuss the questions of hiring and discharging.

Thus attacked and criticized the bill, after the most impassioned discussion,[63] after many important alterations, was finally adopted on January 19, by a vote of 213 to 64. This is the law of February 4, 1920.

II.—The organization of the Factory Workers Councils must be supple enough to permit them to fulfil their mission, whatever the importance or the form of the factory may be. They must be neither too small nor too cumbersome; they must comprise both employers and employÉs; each of these groups must be in position to defend its particular interests; the electoral right must be wholly democratic and minorities must be insured representation, which imposes the obligation of establishing proportional representation; those delegated must always be guided by their duties as representatives. As a consequence of the last, it must be provided that the assembly of electors be enabled to withdraw its support from its representatives and to recall them. The greater part of these conditions was realized by the law of February 4.

The forms that the Factory Workers Councils may assume are extremely diversified.

There is first of all the “Factory Workers Council,” properly so-called, which exists in every industrial or commercial unit and in all the public and private administrations where there are at least twenty workers.

The wage-worker members of the Factory Workers Council constitute a “Workers Council” and the salaried employÉ members make up an “EmployÉ Council.” If the Factory Workers Council has more than nine members it elects according to the principles of proportional representation a “Factory Committee” of five members. If the Factory Workers Council comprises both representatives of workers and of employÉs, each of these two groups must be represented in the Factory Committee.

A “General Factory Workers Council” must be created for enterprises of the same kind situated in the same locality or in adjoining localities and belonging to the same owners, if the Factory Workers Council in each plant so decide. This organization may either remain in juxtaposition with the Factory Workers Councils of the different plants, or it may replace them. In that case it functions as a common Factory Workers Council.

A “shop chairman” must be elected in the place of a Factory Workers Council in establishments employing less than twenty workers, of whom at least five must be electors.

There is finally a “Factory Assembly” composed of all the regular employÉs of the factory. It is convened by the president of the Factory Council. He must convoke it if the employer or at least one-quarter of the workers demand it.

III.—The powers of the Factory Workers Councils are two kinds; social and economic. With one or two exceptions they are both purely deliberative in character.

SOCIAL POWERS:

(A) Conditions of Work.

(1) The Factory Workers Council supervises the execution of legal decrees, of collective bargains and of arbitration decisions in favour of the workers. The regulation of the conditions of work by collective bargaining remains the essential purpose of the Vocational Unions. The Factory Workers Councils cannot and must not replace this general trade union agreement by a regulation which would intervene between the workers of any single factory and the management of that factory, for the conditions of labour, particularly wage scales, must be fixed not simply according to the conditions prevailing in any single factory, but according to the general situation of the industry. On the other hand, the Factory Workers Councils must see to it that the conditions of work agreed to between the manufacturer’s union and the labour organizations are strictly carried out, and must adjust any difficulties that may arise in their application. Each Council must perform the same function in regard to the execution of arbitration decisions and the carrying out of legislative regulatory provisions relative to the condition of the workers.

(2) The Factory Workers Councils co-operate in the fixing of wages and other conditions of work, when these questions are not settled by collective agreement. But it is understood that, even in such a case, the Factory Workers Councils must act in accord with the Trade Unions concerned.

(3) They co-operate with the employer in the adoption of rules for the factory within the framework of the collective bargains in operation.

(4) They examine the questions of pensions for wounded veterans and compensation for those hurt in course of work.

(5) They establish in agreement with the employers rules concerning the hiring of wage-earners and salaried employÉs and they have the right to oppose their discharge. In the respect to the former, the law specifies that the rules relative to hiring must contain no provision by virtue of which the hiring of a worker would be affected by his political, military, religious or union activities. When these rules permit it, the right of the Factory Workers Council, in so far as it concerns the hiring of a worker, is waived and it is the boss or his representative who thereafter decides in each particular case of hiring. But if the boss or his representative violates the rule of contract, the Council of Workers or the Council of EmployÉs may raise a protest. If an agreement is not thereupon reached between the boss and the council, the difficulty is taken before the competent Arbitration Committee which decides finally. On the other hand, in regard to discharges, the law of February 9 gives to the discharged worker the right to appeal it to the Workers Council, and, if an agreement is not reached by this Council, to appeal to the Arbitration Committee in any of the following circumstances: (a) If the discharge is due to the fact that the worker is active in certain political, military, denominational or trade union matters or that he belongs or does not belong to this or that political, denominational, or labour organization; (b) if the discharge is without cause; (c) if the worker is discharged because he has refused to do any piece of work other than that agreed upon when he was hired; (d) if the discharge appears particularly severe, and justified neither by the attitude of the worker nor by the situation in the industry.

(B) Differences between Employers and Workers.

The Factory Workers Councils maintain harmony among the workers as well as between them and the employer, and insure the liberty of organization among the workers. They must help avoid all troubles or disorders that may make difficulties between the employers and the workers, and if such arise, they must abate the trouble as soon as possible.

It is not the part of the Factory Workers Councils to take sides in economic disputes in favour of this or that tendency. It is the organ of all the workers of any industry taken together, and it must permit any labour organization, no matter to what tendency it belongs, to enjoy all the rights and all the control to which it is entitled.

(C) The Well-Being of the Workers.

(1) The Factory Workers Councils must combat the dangers of occupational accidents and diseases.

(2) They must co-operate in the creation of pension funds, the building of workers’ homes, and other institutions of well-being in the factory.

Economic powers.—(1) The Factory Workers Council aids by its technical advice the employer in giving the factory as high an economic efficiency as possible, and co-operates in introducing in the factory new methods of work. This co-operation on the part of the Factory Workers Council assumes that the employer keeps it in touch with the condition in the industry and with the most important events in it. The Council may therefore demand that the employer supply the Factory Committee, or the Council with all the necessary information on the work and the condition of workers, and that he show the pay-rolls—for the purpose of checking up with the schedules agreed upon by collective contracts—and all other documents necessary for the supervision of the execution of collective agreements. This right of inspection is limited in two respects. On the one hand, the Factory Workers Council can only examine records on the economic aspects of the factory, thus excluding all political, union, militarist, denominational, scientific or other investigations on the part of the Councils. On the other hand, the law specifies that this right of examination must not be exercised in such a way that it jeopardizes secrets of the factory or commerce. The question remains as to what must be understood as a secret of the factory or of commerce; this must be settled by judicial decision. From the first moment commentators on the law of February 4th, held that business contracts, records of profits and loss, the schedules and pay-rolls, estimates of net cost, and the purchase price of raw material are not questions that the Factory Workers Councils are forbidden to investigate. In addition the employer must at least once every quarter furnish the Factory Workers Council with a report on the situation and the progress in general of the factory, on its output and on its prospective needs in the way of workers. Finally the Factory Council may demand that every year a balance sheet for the factory and a statement of profit and loss for the preceding year shall be submitted to the Factory Committee, or the Council, if there is no Factory Committee.

(2) In the factories that have Administrative Councils,[64] the wage-earners and salaried employÉs are represented on these councils by one or two delegates. This representation of workers on Administrative Councils has aroused among the employers the liveliest opposition. The Cabinet’s project provided that the worker representatives have the same rights and duties as the other members of the Administrative Councils. But the National Assembly has not followed the Cabinet on this point and has limited the power of the workers’ representatives in the Administrative Council to the mere statement of the interests and claims of the workers, and to the execution of their votes and wishes concerning the organization of the factory. In addition this representation must be regulated by a special law, and, until such a law is passed, that of February 4 confines itself to prescribing that the representatives of the workers have a seat and voice in all the meetings of the Administrative Council, but that they receive no remuneration other than the pay for the time of attendance at the meetings. They are obliged to keep confidential what they learn at the meetings of the Council. The underlying spirit intended for the workers’ representation in the Administrative Council is indicated as follows: “The granting of so extensive a power, changing the right of co-deliberation generally accorded to the working class into a right of codecision, is proposed in the conviction that nothing is better calculated to increase the love of work, the sentiment of responsibility and the output of industries than the right accorded to workers to co-operate under their own responsibility in the supreme direction of the factories.”

One cannot conclude the study of the economic powers of the Factory Workers Councils without saying a word on the question of the co-operation of these Councils in the socialization process. The supporters of the theory of Councils have always forcefully insisted on this co-operation to justify the necessity of giving the maximum power possible to the Factory Workers Council. But the law of February 4 does not grant these councils in economic matters anything but powers of deliberation, hardly even conceding them the right of decision; nor does it give them any privilege other than that of supporting and helping their employers in the achievement of the factory’s purposes. Thereby is denied all action on the part of the Factory Workers Councils that might directly influence the socialization of the factory itself. The law of February 4 seems to take the point of view opposed to that of socialization.

Socialization is a work relegated exclusively to the State and legislation. It cannot be included in the mission of the workers’ representations in a factory. To socialize is to modify economic organization and the right of property, and this change cannot be made except by law. Further, no particular factory can be socialized of itself, that is to say, be transformed by itself into the property of a community. The work of socialization must be undertaken by whole divisions of industry. To accomplish this work it is not the Factory Workers Councils that are competent, but only the parliamentary representation of the whole people.

However, among the partisans of the Factory Workers Councils, some hope that these Councils will be able to give the workers a socialist education by affording them the chance to participate in economic affairs. They believe that, thanks to the Workers Councils, there will finally be formed a working class ready, under responsibility, to fulfil administrative duties in a socialist commonwealth. The Factory Workers Councils according to them will be a school for socialism.[65]

4.—THE TRADE UNIONS AND THE COUNCILS.

Such, in outline, is the law of February 4, 1920. The first elections of the Factory Workers Councils were held during the month of May that followed. Immediately there broke out disputes and rivalries, more violent than before, between the Trade Unions and the partisans of the Councils systems over the rÔle which the Factory Workers Councils should play, and particularly over the relations that should subsist between these Councils and the Trade Unions.

The union leaders wanted to maintain their traditional policy, “the wage policy” of the joint committee and the Arbeitsgemeinschaft. They held that economic and social reforms can only be accomplished progressively, given the complexity of economic phenomena, and they were convinced that the necessary evolution will take place naturally, thanks to co-operation of employers’ and employÉs’ organizations in the Arbeitsgemeinschaften.

The development of these organisms since the revolution seems to support their opinion. On the basis of agreements concluded in December, 1918, the Arbeitsgemeinschaften have taken on considerable extension. Little by little the organisms provided by the statute of December 4, 1918, have been created and expanded. Not only have individual Arbeitsgemeinschaften been established between employers’ and employÉs’ organizations, but these have also been formed into larger groups. For example, the Arbeitsgemeinschaft of the Ruhr mines, those of the Sarre, of Saxony and of Upper Silesia have united into a central Arbeitsgemeinschaft, that represents the interests of the whole coal mining industry of Germany. It is administered by a Central Council composed, of course, of equal numbers of employer and worker delegates. A great number of other industries have organized on the same model and they, too, have added above the local organs a Central Council that represents the general vocational interests. Finally, the Central Committees of the different industries have joined and thus created on December 12, 1919, a central Arbeitsgemeinschaft, which constitutes the supreme organization and which is charged with settling by direct agreements between employers and employÉs and on a parity basis all the problems that touch the life of the industries and trades in Germany. This is sub-divided into fourteen vocational groups: iron, provisions, construction, textile, clothing, paper, leather, transports, glass and ceramics, chemistry, oils and fats, forest and land workers, mines and lumber. The Central Executive Committee (Central Vorstand) is composed of twenty-three members chosen by the employers and twenty-three by the workers. Other Committees are created on which the Central Committee places part of its work. Seven such have already been constituted, on the study of wages, labour legislation, economic policy, raw material, coal and transports, tariffs, the execution of the treaty of peace and the internal regulations of the Arbeitsgemeinschaft.

All this movement, say the trade unions, represent undeniable progress. For the hostile interests of employer and employÉ is substituted the interest of the vocation as a whole, which creates in the employers and workers of the same vocation a consciousness of the community of their interests and engenders among the different industries a fruitful rivalry. In uniting the Arbeitsgemeinschaften of all the industries, conflicting interests are placed in equilibrium and neutralized and there remains only common consciousness of national interests.

What can the Factory Workers Councils do otherwise than enter into the framework of already existing organisms and, directed by the Trades Unions, aid in the development of these organisms? In other words, the Factory Workers Councils—and this is also the formal will of the legislator—should be the delegates of the Trades Unions in each factory to supervise there the application of the agreements adopted by the Trades Unions and the employers associations. In addition what could the Factory Workers Councils do if they had not behind them the power of the strong organizations of the Trades Unions? A Factory Workers Council, that could not count on the support of a strong union, could exercise no useful activity whatever. It would be soft wax in the hands of the employers. If they want to do efficacious work, the Factory Workers Councils, even though they are the direct emanation from the workers of the factory, must conduct themselves as organs of the Trade Union, and can only play an important rÔle if they march hand in hand with the Trade Union.

This dependence of the Factory Workers Councils on the Trade Union gives rise naturally to two considerations. The Factory Workers Council is without resources, whereas the Trade Union is rich; the one cannot undertake anything without the aid of the other. But naturally it will not obtain this aid unless it submits to the guidance given it. On the other hand, in order to discuss adequately with the employer the difficult problems that come within the authority of the Factory Workers Council, there is required a preliminary education which the worker does not possess unless he has had long experience in Trade Union life. He often lacks the knowledge and the experience which cannot be acquired except slowly and in the school of the Trade Unions. For this reason also, the Factory Workers Councils should follow Trade Union direction.

The champions of the system of Councils do not concede this subordination of the Factory Workers Councils to the Trade Unions. There is an essential difference between the two, they declare. The Trade Union has as its exclusive mission the preparation and the direction of struggles for wages and conditions of work under the rÉgime of capitalist production. The Factory Workers Council is warring for a new system of production. And its mission is to prepare the working class to take into its own hands the direction of production. That is why the organization of the Factory Workers Council must be independent of the Trades Unions, and must develop outside of the framework of the Trades Unions.

The task which the Factory Workers Councils must accomplish and which must serve as the basis of all their future activity, is to achieve a unity of front of the whole working class. The Trade Unions have not yet brought themselves to take the initiative in this fundamental reform. At the present time workers are still scattered among approximately fifty Trades Unions, which are divided still further into a number of sections and branches. There is an inextricable network of collective contracts, “tariffs,” and wage agreements down to the smallest labour group, representing a great amount of work; but this cannot in the least ameliorate the economic condition of the working class.

One thing must immediately be abolished, the Arbeitsgemeinschaft, because it is contrary to the doctrine of the class struggle, and because, under the pretext of co-operation, it insures the domination of the capitalist over the worker.

As for the Trades Unions, the champions of the Factory Workers Council recognize that the latter, although working on a different plan, must remain in intimate contact with the former. But there is an indispensable reform to be realized. Organization by trades must be replaced by organization by industries or factories. In other words, all the vocations functioning at the same time in the same industry must be grouped within the same organization. In still other words, the separation of wage-earners associations from the associations of salaried employÉs must be done away with. On the contrary, all manual and intellectual workers of the same industry must join together and consecrate all their efforts to a common end.

Finally, declared the partisans of the Councils, the Factory Workers Councils cannot remain isolated in the various separate industries. They can only fulfil their function if they unite in district assemblies and organize in such a way as to create a “Central Organ of the Factory Workers Councils,” which will direct the activity of all the Factory Workers Councils of Germany.

These arguments were not without effect on the Trades Union leaders. They still maintained, naturally, the principle that the Factory Workers Councils must enter into the Trade Union organization and that they must remain an organ of the latter. But they declared themselves ready to accept a great part of the reforms demanded by their critics.

Moreover the General Federation of Labour and the General Federation of Salaried EmployÉs organized “A Central Union of the Factory Workers Council,” whose purpose is to unite the Factory Workers Councils with the unions of wage-earners and salaried employÉs, and to incorporate them into the whole Trade Union organization. To this end they undertook a complete local organization of the Factory Workers Councils. First the District Committees of the Trades Unions were to proceed to a redistribution of the Factory Workers Councils into fifteen industrial groups. Each industrial group was to decide independently on the matters that concern the vocations included in this group. The Group Council had to include a member of the Trade Union or of the corresponding union of salaried employÉs. This organization by groups was to insure the co-operation of Factory Workers Councils on an industry basis, and thus attempt to meet the criticisms of partisans of the Councils. Above the different industrial groups three organs were provided which would represent the Factory Workers Councils as a whole: the General Assembly of all the Factory Workers Councils, the Central Council, and the Central Committee.

The mission of the Trade Union organization of the Factory Workers Councils would be to give the latter a Trade Union direction and development, to unite in the factories all economic and social forces available, and to utilize these forces for the defence of the common interests of all workers. There is thus a division of labour between the traditional mission of the Trade Union branches and that of their local committees, on whom would be still incumbent the duties of specifically Trade Union organization, whereas questions of general, social and economic policy would be given over to the “Central Factory Workers Council.” It follows that the two parallel organizations must work hand in hand and must consult each other on all questions, thus doing away with all possibility of conflict.

Such was the plan, duly elaborated by the Trade Unions, which at this time is submitted for discussion in common by the Factory Workers Councils and the Vocational Associations of Germany. Naturally, it is impossible to foretell what will result from these deliberations. All that can be said at present is that the members of the Factory Workers Councils are almost exclusively elected from among the wage-earners and salaried employÉs already active in the Trade Unions, and thus the conception to which the Trade Unions seem to cling above everything else, the incorporation of the Factory Workers Councils into the Trade Union associations, seems destined to be realized of its own accord.

5.—THE PROVISIONAL ECONOMIC COUNCIL.

These discussions, these vacillations, these difficulties, have up to now prevented the government from submitting the necessary projects of laws for the creation and organization of Councils, other than Factory Workers Councils, provided for by the Constitution. In May, 1920, there was an attempt to propose a law on “Local Workers Councils.” But the government declared that it had not yet arrived at a clear conception of the relations between the Factory Workers Councils, the future Economic Councils and the employers’ organizations, and that it was still pursuing its studies.

In view of the impossibility of continuing the building of the structure from below, it was decided to change the method and, returning to the system rejected the year before, resignedly the attempt was made to continue from above. There was thus created a “Provisional Economic Council.”

The organization of this Council, provisional as it must be, has not proceeded without presenting great difficulties, which it is interesting to sum up.

I.—This Council must consist of the representatives of all economic, agricultural, commercial, and industrial interests. The first question that came up was to fix the number of representatives to be allowed to each different interest. Naturally, violent conflicts arose, each interest fighting for the largest representation possible. Instead of establishing a proportion based on the respective importance of the various vocations in German economic life, and of holding to this proportion, the Cabinet increased the total number of members of the Economic Council as fast as this or that interest claimed a stronger representation, with the result that the number of representatives, originally fixed at a hundred, increased to 280 and finally became 326. It is clear that the resulting proportion that came from these successive increases favours agriculture to the detriment of industry and the middle classes.

A place was given to the representatives of consumers; unwisely, according to some critics. For one can understand the adding of the consumers to the assembly of the producers of some one single industrial group, that of coal, for example, which grows always at the expense of the consumers. But in the Economic Council, all industries and vocations are by definition represented; the producers in one industry are the consumers in all the others and it is unnecessary to add to them, in order to represent the interests of consumers, additional representatives, who by hypothesis are only consumers.

The 326 members of the Economic Council are allotted as follows:

• 68 representatives of agriculture and forestry.
• 6 representatives of market industries and fisheries.
• 68 representatives of general industry.
• 44 representatives of commerce, banks and insurance.
• 34 representatives of transport enterprises.
• 36 representatives of small business and small industries.
• 30 representatives of consumers (municipalities, consumers’ associations and organizations of women).
• 16 representatives of civil servants and the professions.
• 24 other persons named by the government.

II.—There then followed the question of how the delegates of each group are to be appointed. The discussion reverted to the question whether these delegates should be appointed by vocation or region. Where employers and workers were grouped, the principle of parity was naturally adhered to. Agriculture, for example, which is entitled to 44 delegates, was represented by 22 land owners and 22 agricultural workers. On the other hand, the mode of nomination in all groups representing workers offered but few problems, for—at least until the Factory Workers Councils have united and become organized geographically over the whole Reich—the only labour organizations are those of the Trade Unions; that is to say, organizations almost exclusively vocational, and the labour delegates to the Economic Council cannot be elected except by means of these organizations. But the problem became much more complex in the case of the election of representatives of employers and property owners. These had, in addition to their industrial associations, organs of regional representation, such as chambers of commerce, chambers of agriculture, boards of trade, etc. Should their delegates throughout be elected by regional organs or by associations? The Reichsrat replied, by chambers of commerce; and the National Assembly declared for associations.

The partisans of representation by chambers of commerce pointed out that these chambers are, according to existing legislation, the only representatives of industry and of commerce in public law; that they embrace all the industrial and commercial circles, considered vocationally as well as regionally, and that they constitute an electoral body more complete than the organizations on a purely professional basis; and that, in contrast to the associations, the chambers of commerce are elected by all the manufacturers and merchants inscribed on the register of commerce.

The supporters of the associations replied that, great as was the service rendered by the Chambers of Commerce as local and regional corporations, they play almost no rÔle whatever in the public economy of Germany. Their influence on economic management is practically nil; and they are limited in the matter of projects for new laws, to the voting of resolutions that have no outcome whatever. The special business associations, however, although without official standing in public law, are acquiring more and more importance in the public economy of Germany. What is most important is to make up the Economic Council of “heads”—of the most eminent men from each industry, whether of the North or the South, the West or the East.

The solution adopted does not seem to have been a particularly happy one. Of the sixty-eight industrial delegates, forty-eight represent vocational divisions and twenty represent regional groups. Of the first, forty-two are designated by the Arbeitsgemeinschaft of the employers and industrial workers of Germany (twenty-one employers and twenty-one workers); six others represent the Council of Coal and the Council of Potash. Of the regional representatives, twenty employers are named by the Chambers of Commerce and of Agriculture but twenty workers are named by the labour element of the Central Arbeitsgemeinschaft.

III.—The authority of the Provisional Economic Council is not quite the same as that of the final Economic Council, provided by the Constitution.

It must, and that was its essential mission, construct the framework on which the future Economic Council is to be erected, and determine how it shall be elected. This necessitates its organizing in advance Workers Councils, aside from Factory Workers Councils, and Economic Councils for each locality, which, according to the Constitution, must contribute to the formation of the National Economic Council.

In addition, the Provisional Economic Council must examine the projects of all important laws, economic and social in nature, that the Cabinet is required to submit to it for advice before placing them before the Parliament. It must be heard on proposals for decrees and important regulations. It has itself the right to present proposals for laws.

These powers are the same as those projected for the final Economic Council. But the two differ in an important respect. Whereas, according to the Constitution, the Economic Council will have the right, when it differs in opinion from the Cabinet, to present its point of view by one of its members before the Reichstag, it has not been considered feasible, for constitutional reasons, to recognize the same right for the Provisional Economic Council.

Generally, however, the Provisional Economic Council is considered as already constituting an Economic Parliament, and at the commencement of its work[66] it was so regarded by the press.

It does not deserve this name, for it has no power of decision. It is purely and simply a technical Council that advises the Cabinet on principal economic questions. It differs from ordinary technical Councils in that instead of being appointed most of its members are elected. One cannot therefore criticize it from the point of view of formal democracy, in the way that any parliament composed according to the parity principle can be criticized, viz., that each employer-member represents much fewer electors than the worker-members. As it is here a matter of a council of experts, the most important thing was to gather the best qualified authorities of the whole country. It is evident, therefore, that in the present state of affairs such authorities are found much more easily among employers than among workers. The relative proportion of these two elements within the Provisional Economic Council matters little since decision lies exclusively with the assembly elected by universal suffrage.

Meanwhile, however, the importance of the services that the Economic Council can be called upon to render must not be underestimated. It is undeniable that, as at present composed, it has gathered together nearly all the men considered in Germany to-day as the most experienced and trained authorities in economic matters. It must not be lost sight of also that a great number of these men, aside from their individual importance, have behind them the support of the whole force of the extremely powerful vocational and economic associations by which they were elected.

One immediate danger menaces the Economic Council. It is that the men who compose it will let themselves be guided on the technical questions they are to examine by party considerations. It may be divided—as is natural—into groups of employers, groups of workers, groups of agriculturalists, industrialists, and merchants. If it turns out to be an assembly of conservatives, democrats, Catholics and socialists, it is doomed to sterility.

If, however, the Economic Council avoids this danger it will render, first of all, the service of clarifying the political atmosphere itself. The members will defend very legitimately only the interests by which they were charged with representation. In this way economic groups will not need to act indirectly through the intermediate agency of political representatives. They will be able to express their point of view clearly and support their interests directly. The political parties, too, will gain thereby; for they will be freed of all considerations of interest and they will no longer have to complicate technical problems by imposing on them their general political conceptions. As for the authority that will accrue to the Economic Council, it depends entirely on itself whether it will be nullified or preponderant, and its future lies in its own hands.

Former Under-Secretary of State, von DelbrÜck said before the National Assembly—speaking, it is true, of the Economic Council to be organized by the Constitution, but the Provisional Economic Council is nevertheless its precursor—that the Economic Council is without doubt, by the side of the Reichstag and the Reichsrat, a third legislative assembly. For such an assembly, “called upon to deliberate on the most important questions in the national life, will necessarily have a natural tendency to enlarge its powers. We are undoubtedly on the eve of a period in which the Reichstag and the Reichsrat will be considered as one side of a balance, and the Economic Council as the other. Behold in this a wholly new political evolution. There will come a day when the Economic Council will seek to become the heir of the Reichsrat and to take its place.”

Will this prediction be realized? It will if the Economic Council is able to render the government and the people the services they expect of it. It will not if it does not deserve to be heard by them and does not know how to make itself heard.

SECTION II
SOCIALIZATION

In order to reconstruct in Germany the public and private economy destroyed by the war and the revolution, it is not enough to give the producers a special right to co-operate in the regulation of economic questions; nor to recognize particularly for the working class the right of co-deliberation in the determination of these matters. It is hoped that such measures will increase production. But it is also necessary that no part of production be lost and that all of it be utilized to the utmost for the community. One is thus led to inquire whether the system of production and the distribution of wealth, such as prevails under a capitalist rÉgime, is capable even if improved, of attaining such an end; whether it were not better to substitute a new system, socialist or not, giving the utmost guarantee that production will benefit the entire community.

We must inquire what attitude the Constituent Assembly took on this question and what solution it adopted.

1.—THE PROBLEM OF SOCIALIZATION.

On the morrow of the Revolution, power passed entirely into the hands of socialists, that is to say, by definition, men whose programme may be summed up in these words: the abolition of private property and the taking over by the state of all the means of capitalist production.

The Independents undoubtedly would have set about at once the task of realizing this programme. But we have seen that they had but a brief period of power; and the Social Democrats seemed less in a hurry to keep their promises.

For the moment the political revolution was enough to absorb all their activity, and they postponed the economic revolution. They declared that an industry cannot be socialized until it is “ripe” for such a measure. But, they further declared, this maturity cannot be suddenly effected by a vote of Parliament or even by the decision of the majority of the people. It is the product of a slow social development, which may find its expression in the vote of a majority, but which cannot be thereby hastened. To tell the truth, the Social Democrats, whom events had placed with their back to the wall, perceived how difficult it is to put into practice the vague theories with which they had heretofore contented themselves. Not only did they realize that the solution of economic questions raised by socialization is extremely difficult, but they became also convinced that it was necessary first to consolidate some of the elements of German economic life that had survived the war and its unhappy conclusion before proceeding to experiments which might accomplish their ruin. They resolved therefore to study the problems of socialization more deeply before passing to its realization. For this purpose they created, November, 1918, a “Committee on Socialization” which was not to be an official organ but a free scientific committee charged with the drawing up of reports and proposals on the question of socialization. It consisted of eleven members with Kautsky as chairman.

But the impatience of the masses did not give the Socialist Cabinet the respite they required. The people, who for years had been promised the abolition of private capitalist property, and who saw in the realization of the Socialist programme the end of the miserable situation into which the war and the revolution had plunged them, demanded immediate measures. The general strike which broke out in Berlin in March, 1919, and which, as we have seen, prompted the Cabinet to promise the “anchorage” of the Councils in the Constitution, also pushed it to prepare in haste two projects of law—one on socialization, the other on the regulation of the coal industry, the two projects being adopted within a few days by the National Assembly. The two laws carried the date of March 23, 1919. The first is what is called in Germany a “blanket law” or a “skeleton law.” It indicates the different forms according to which socialization of private enterprises may become operative, and the conditions in which these enterprises, once socialized, may be exploited. The second makes immediate application of these principles to the coal industry. In addition another law voted several days later, April 29, 1919, regulated according to the same principles the potash industry.

Whereupon the members of the Committee on Socialization, who complained of having their work constantly impeded by the Cabinet, and their recommendations remaining unheeded, handed in their resignations on April 7, 1919.

On the other hand, the Minister of Public Economy, the Social Democrat, Rudolph Wissel, finding the measures for socialization taken or proposed by the Cabinet too timid and insufficient addressed a memorandum to the Council of Ministers on May 7, which had great reverberation throughout Germany as soon as it became known.[67]

The Cabinet, said Wissel, followed a policy inconsistent and without unity. Within the Council of Ministers a decision on fundamental questions was avoided in order not to put the coalition in danger; and the few measures taken were compromises dictated by necessity.

Meanwhile the economic situation of Germany was in an almost desperate state, and a menacing catastrophe could be avoided only by completely transforming the system of production that prevailed in peace times. Wissel declared that he was not speaking of expropriation, for that would do no more than substitute the state for private capitalism, that is to say, one exploiter for another. But what he referred to was the restriction of illegitimate profits, the regulation of prices and the control of the distribution of profits. Production and consumption must be organized according to a co-ordinated plan in such a way that enterprises may be exploited in the interest of all and not to the exclusive profit of some. It was imperative to proceed by some solution as a whole and not by incoherent and isolated attempts.

The principal measures for which Wissel demanded immediate adoption were the following:

(1) The organization of the system of Councils by a special law without waiting for the adoption of the Constitution. They must include organizations of workers and of employers, regional and vocational. These last, which would rest on the parity principle of the Arbeitsgemeinschaft, would have for their mission the direction of the economy in the vocation they represented, this direction to follow the principles decreed by the Cabinet. There must be in addition an Economic Council, which will be the supreme organ of the whole German collective economy.

(2) Other branches of production must be regulated on the model of the regulation already in operation for coal and potash. The next to be thus regulated must be electricity and the cereals.

(3) The State must take a more and more important part in the functioning and in the profits of industrial enterprises. By an inheritance tax and by a tax on capital there must be put into the hands of the State a great part of the industrial fortunes. Instead of collecting these taxes in money or in war loans, the state must become the proprietor of part of the enterprises in the form of shares.

(4) The stocks and bonds of the industrial concerns of the State will be administered not by a Minister, but by a national bank which will conduct its business according to purely economic rules to the exclusion of all political considerations.

By these last two measures will be realized what the supporters of this system call a “progressive mediatization of capital.”

(5) There will be created funds of several billions of marks which will be administered by an office acting in close relation with the vocational economic organization and designed to procure employment for German workers.

(6) The cost of necessities which Germany must import exceeds greatly the cost of domestic commodities. This circumstance compels the increase of wages, which in turn causes the cost of living to rise and lowers the value of money. To counteract this part of all wages must be distributed hereafter in provisions, clothes, etc. Credits will be opened by financiers and by the State.

(7) Temporarily the right to strike in certain industries vital to the German economy will be restricted. The right to stop work will have to be voted by nine-tenths of those employed in that industry.

(8) To realize this programme the number of Ministers who will occupy themselves with economic questions will be reduced to three. They will constitute within the Cabinet an “Economic Committee,” whose directions will have to be followed absolutely by the political Ministers.

On the whole this project aimed at the realization of a state intermediate between capitalism and socialism.

Defended only among the socialists by a small group of doctrinaires, this project had against it at the same time the Independents, the bourgeois parties and the Social Democrats. The Independents opposed it because it permitted capital to survive. The bourgeois parties opposed it because the supervised economy prevented the free play of economic factors and paralyzed initiative. The Social Democrats opposed it for fear of dissatisfying the Centre and the Democrats, of whom they had need to maintain themselves in power. Particularly opposed to Wissel’s project were the Trade Union conceptions supported in the Cabinet by the Minister of Food Supply, Robert Schmidt. He presented a counter-project which embodied the argument which the Socialists of the government opposed to the theoreticians of socialism. The work of socialization, said they, must be undertaken but slowly and the socialization of an industry must wait until that industry is sufficiently matured. This last conception prevailed and in July, 1919, Wissel resigned. Thereupon the offices of the Minister of Public Economy and that of Food Supply were merged and Robert Schmidt given the unified post.

It was to be expected, therefore, that the process of socialization would be considerably slowed up. In fact, the Constitution of the month of August confined itself to specifying and enlarging in several respects the principles of the law of socialization of March 23; and for several months there was only one law enacted along these lines, that of December 31, 1919, on the socialization of electricity.

But once more the people intervened. It may be recalled that one of the “Eight Points” of the agreement imposed on the Cabinet by the Trade Unions after the coup d’État by Kapp, provided that the Committee on Socialization be at once reconvened, that representatives of vocational associations be added to it, that new industries be socialized and that the socialization of industries already decreed be enforced.

In conformity with these engagements, the Cabinet in the beginning of May, 1920, submitted to the Reichstag a project of law that provided for the municipalization of a certain number of industrial enterprises, and reconvened the Committee on Socialization. The members of this committee, who were authorized to add to their number new colleagues on the condition that the total number of the members should not exceed thirty, were given a double mission. First they were to study and clarify the fundamental principles of socialism, for the purpose of determining the general lines along which the capitalist system should be transformed. Then they were to submit concrete and immediate proposals, which, inspired by the laws of collective economy, would permit the commonwealth to utilize directly the natural resources and the sources of power. The committee had also to study how the industries already socialized were functioning, what results had been attained and to propose, if necessary, all needful changes.

2.—THE COLLECTIVE ECONOMY.

All these labours, all these investigations, all these discussions of the problem of socialization had one result. They have shown how confused, even among the socialists, is the concept of socialism; that behind the same word may hide two economic systems extremely different, and that a whole series of almost imperceptible gradations may exist between the capitalist system and complete socialism.

The Constitution raises the following principle: Economic organization must cease to be dominated by considerations of private interests in order that hereafter it may be inspired exclusively by considerations of public interests. Private interests must be subordinated to collective interests. The present economic rÉgime, based on private ownership, must be substituted by a new rÉgime based on collective ownership (Gemeinwirtschaft). What is understood by this?

In its largest sense the expression “collective economy” may be defined as an organization, following a certain predetermined plan, of the economic system of a country for the purpose, on the one hand, of obtaining as large an increase as possible in production by the union of all forces affecting economy; and, on the other hand, for the purpose of devoting a proper part of the product to the community or to its productive members.[68] Thus a system of collective economy is any system that increases public influence in private enterprise, on the condition that it results in a more just administration and distribution, particularly in the cases of monopolized industries already organized into trusts or cartels.

In practice, the principle of collective economy may be applied under three different forms:

(1) The State may take over immediately and entirely the ownership of the industries it wishes to subject to the new rÉgime, and direct by itself and alone, with the aid of its civil servants, the industries which it has seized. This is complete socialization.

(2) The State may content itself with participating in the ownership of certain private enterprises. It owns, for example, a certain number of shares in a corporation. In such a case, it does not manage the enterprise wholly, but it has the right of codecision in the general direction of affairs. This is partial socialization.

(3) Finally, the State may leave in the hands of individuals the ownership of enterprises which it wishes to subject to the principles of collective economy; but it unites, if necessary by constraint, all those that belong in one industry or in the same category of industries, such as chemistry, coal, metallurgy, etc. Thus united the enterprises are administered by means of organs in which are represented all the categories of the population interested in it, such as owners, workers, trade unionists, consumers, etc. These organs must be guided, in the direction they give to this management, above all by a concern for the general interests of the commonwealth. This is collective economy properly so-called or nationalization.

This last form of collective economy is particularly interesting, be it said. For, on the one hand, it avoids the just criticisms of bureaucracy and exaction generally directed against socialism properly so-called. On the other hand, it takes into account the principal demands of the working class at the present time in recognizing for the workers the right to participate in the direction of business enterprises.[69]

The Constitution does not clearly choose between these three different methods of applying the principles of collective economy in the large sense of the word. It declares all three possible and leaves to the ordinary legislature, whenever it is desirable to regulate an industry in the general interest, the task of choosing the bearing it wishes to give such regulations and the rÉgime to which it wishes to subject the industry in question.

(1) In effect, according to the terms of Article 156 of the Constitution, the Reich may transfer private business enterprises to public ownership, that is to say, take over the property for the Reich, the States, or for the municipalities.

(2) The Reich may participate itself or have the States or the municipalities participate in the administration of these enterprises, or may secure for itself in some other manner a decisive influence in these enterprises.

(3) Or, finally, without taking to itself all or part of these enterprises the Reich may regulate, on the basis of autonomy and according to the principles of collective economy, the production and the distribution of wealth.

In this last case the Constitution specifies that the business enterprises which are made subject to a nationalization measure, shall form “an autonomous body” (SelbstverwaltungskÖrper). This is a new form in public law. The “autonomous body” is somewhat analogous to ordinary public corporations. It administers itself with the organs necessary for it. It enjoys great independence, but it is nevertheless subject to supervision by the State. Article 156, par. 2, of the Constitution specifies that when legislation subjects a given industry to the system of nationalization and organizes the autonomous body it must constitute the administrative organs of this body in such a way that there shall be insured the co-operation of all the producing elements of the people, and that the salaried employÉs and wage-earners participate in administration and that the production and distribution satisfy first of all the interests of the commonwealth.

These organs form the Industrial Economic Councils which we have already examined. An example will illustrate this hypothesis. Legislature decides, for instance, to subject the chemical industry to the rÉgime of the collective economy. It combines, therefore, all the manufactories of chemical products into a sort of obligatory cartel, the bond uniting the different manufactories being more or less close according to circumstances. The system of administration by “autonomous bodies” will consist of the institution of one or more organisms, such as Economic Councils of the Chemical Industry, in which will be represented all the individuals, associations and Councils interested, and which will manage together the German chemical industry. The chemical industry will thus form an autonomous body, that is to say, a sort of public corporation under the supervision of the State. Further than this, however, it is not possible at the present time to specify the distinctive traits of this new legal category. We must wait until legislation has organized a number of autonomous bodies before we can state precisely their general characteristics and give them a place in the collective institutions of public law. Still less possible, naturally, is it to forecast the economic consequences to which they may give rise.

However, the Constitution has not felt that it should give the ordinary legislator absolute freedom to proceed according to his fancy to the enactment of measures for socialization more or less complete. It has therefore provided certain limits on the exercise of the rights it confers on the legislature.

(1) Only the legislature of the Reich may enact socialization measures.

(2) No industry may be socialized except when it is “ripe for this socialization.” This is the so-called maturity clause.

(3) Enterprises which the legislator wishes to organize as “autonomous bodies” may not be so proceeded against except “in case of urgent necessity.”

These last two restrictions may seem very important. In reality, however, they constitute a purely fictitious restraint; for the legislature is the sole judge, at any time that it wishes to socialize an industry, as to whether that industry is “ripe” or not, and whether or not the case is one of urgent necessity.

(4) There remains finally the question of indemnity. As may well be imagined, during the discussion of the project of the socialization law as well as during the deliberations on the project of the Constitution, this question was very vigorously discussed. The Socialist parties wanted no allusion made to this question in the text of the law or that of the Constitution. The bourgeois parties demanded that at least in the case of complete socialization the state should be absolutely obliged to accord an indemnity. It was impossible to arrive at agreement. So that although the principle of indemnity was incorporated, it was left to the legislature, whenever it enacts a special law decreeing a socialization measure, to decide whether or not indemnity shall be accorded and to what extent.

In accordance with the above provisions a certain number of industries have been placed under the rÉgime of collective ownership, where they are about to be transformed.

For the coal, potash and iron industries the laws of March 23, of April 29, 1919, and the regulation of April 1, 1920, have chosen the system of collective ownership, properly so-called. That is to say, the industries of coal, potash and metallurgy, although to a very limited extent, have been organized into autonomous bodies, self-administering under the supervision of the Reich.

As to electricity, the law of December 31, 1919, provides that electrical plants that have acquired a certain importance will become the property of the Reich, the latter, however, providing a suitable indemnity.

The project of the law relative to municipalization, finally, provides that municipalities may, with the authorization of the Reich, transfer to the rÉgime of collective ownership private industries that serve principally common local needs. Full authority is given the municipalities over all that concerns transportation, water, gas, cinematographs, theatres, burial, baths, etc. These enterprises may be either taken over entirely as the property of the municipalities, or be organized into autonomous bodies. In principle the municipality is required to indemnify in all such cases.

It is impossible to examine here in full detail these or later laws. It is interesting, however, to devote several pages in describing in a very general way, in view of the great importance of the coal industry at the present time, the system into which it has been transformed.

3.—THE REGULATION OF THE COAL INDUSTRY.

The crisis in coal which to-day exists in almost every country in the world has led the different governments to take various measures either to avert it or to diminish it. In general, coal mining has remained in the domain of private economy. Distribution, however, has passed more or less completely into the domain of collective economy. The systems of distribution to which the different countries have resorted are various. According to the given circumstances they adopt one or another of three possible modes of public economy. In France, the distribution of mined or imported coal is carried on by the state itself. In Germany it is done by a group of organisms in which are represented the various interested elements of the population, but in which provisionally the mine owners predominate.

It is advisable to study first the existing system in the coal industry in order to understand better the changes we are examining.

I.—As regulated by the law of March 23, 1919, and the decree of August 21, of the same year, the mechanism of the coal industry consists of three organs: the Colliers Association, the National Association, and the National Coal Council.

The German Reich is divided into a certain number of coal mining districts. In each district all the mine owners associations must form a Colliers Association. If this cannot be accomplished voluntarily the Minister of Public Economy promulgates the organization by means of a decree. Each Colliers Association must have a Council of Administration, in which it is obligatory that the workers be allowed representation. In addition, in the Councils of Administration of the five biggest associations there must be admitted a representative of the salaried employÉs. The Council of Administration has the authority commonly accorded to the councils of administration of stock companies by the Commercial Code; it appoints its own president. In the same way all the owners of gasworks that produce coke are united for the whole territory of the Reich into an Association of Coal-gas Manufacturers, formed on the same model as the Colliers’ Associations.

The Colliers Associations, the association of Coal-gas Manufacturers and the German states that belong, by virtue of ownership of mines, in the Colliers Associations, are united into a National Coal Association. This has a Council of Administration in which must be included three wage-earners and salaried employÉs and one representative of the consumers.

The National Coal Council is composed of sixty members—representatives of the states, of mine owners organizations, wage-earners, office workers, consumers, etc.[70] It is convened as often as conditions demand and at least once every six months. It must in addition be convened if at least ten of its members or the Minister of Public Economy of the Reich demand it. It decides by majority vote. It creates three technical committees, The Economic Committee on Mining Construction, The Economic Committee for the Utilization of Combustibles and The Social Committee of the Mines. Each member of the National Coal Council must belong to a committee. The cost of the administration of the National Coal Council and of its committees is borne by the National Colliers Associations.

Each of these organs has its own special powers.

The National Coal Council directs the economy of combustibles, in which is included importation and exportation, according to the principles of collective economy under the supervision of the Reich. It must approve the charters according to which the Colliers Associations and the National Coal Association are organized. The National Coal Council may decree general policies for the administration of combustibles, in particular for the abolition of unproductive enterprises and for the protection of consumers. It sees to it that the National Coal Association and the technical committees of the Coal Council work according to the same principles and in a coherent system. It may demand information from any of the organs that participate in the fuel industry; and the authorities and committees are obliged to give it any assistance it demands. The technical committee collect all important data based on practice and experience, study all matters that enter within their domain and prepare decisions for the National Coal Council.

The National Coal Association controls the application of the general policies and decisions decreed by the National Coal Council and regulates the details of the execution of these decrees. It must approve the general conditions of the coal deliveries of the Colliers Association. It establishes and publishes the selling prices of fuel, taking into account proposals made by unions and the interests of the consumers. On this point it must insure the same treatment for the consumers’ societies as for the wholesalers, and see to it that each consumer, who takes at least a full carload of coal at the mine or at the point of delivery, shall obtain fuel under predetermined conditions for cash payment. Finally, the National Coal Association has authority in questions of import and export.

The Colliers Associations supervise the application of the decrees issued by the National Coal Council and by the National Coal Association, and, within the framework of these decrees, regulate the production, utilization and consumption on the part of their members. They, themselves, sell the fuel which should be put at their disposal by their members, on the account of the latter. The powers of the Association of Coal-gas Manufacturers are similar.

The mining companies may raise claims and protests against the regulations of the Associations of which they are members, appealing to the National Coal Association and beyond that to the National Coal Council.

If any measure on the part of the National Coal Council, the National Coal Association, or of the Colliers Associations violates any vested right, the individual or the association injured is entitled to suitable indemnity. This indemnity may be sued for before ordinary tribunals.

The powers of the Reich, the States, and the municipalities are fixed by the decree of August, 1919, as follows:

The Reich, through the intermediacy of the Minister of Public Economy, exercises general control over the fuel economy. The Minister may in particular lower the price of coal fixed by the National Coal Association. He may also organize a representation of fuel consumers, a representation with authority to fix the retail price of coal. The cost incurred by the Reich in the execution of the law on the regulation of coal, up to a minimum of 200,000 marks per year, must be borne by the National Coal Association.

The States represented by the Committee on Commerce and Industry in the Reichsrat are authorized to participate in the deliberations of the National Coal Council and its committees, but only with consultative powers. Fiscal authorities are authorized to demand information of the National Coal Council of the Reich and of its committees as well as of the National Coal Associations and of the Colliers Associations.

Municipalities of at least 10,000 inhabitants and groups and Unions of Municipalities, after having heard the claims of dealers and consumers, and guided by the wholesale price of coal fixed by the National Coal Association, are themselves empowered to fix the retail price within their territories.

II.—The regulation above described was far from giving complete satisfaction. It has been attacked both by the consumers and the socialists. The latter criticize it as not having gone far enough along the road of nationalization. The former, on the other hand, complain that prices are fixed by an Assembly in which coal owners form a very great majority (The National Coal Association), and that the other interests are not able to make themselves sufficiently heard. The result of this system is that the coal producers always come to agreement to the detriment of the consumers and constantly increase the price of coal.

It must be conceded to the socialists that in the system established by the law of March 23, 1919, the principles of collective economy are applied in the most parsimonious manner possible. The only Council in which there is parity between employers and workers is the National Coal Council, but the rÔle of this Council is reduced to a minimum. The real directors and administrators of the coal industry are the Colliers Associations and the National Coal Association. The National Coal Council has hardly any effective power. As for the Cabinet, the right of the Minister of Public Economy to oppose his veto to measures taken by the National Coal Association and in particular to lower by law the prices fixed by the latter, is considered by the Socialists entirely insufficient in view of the close co-operation of the coal mine owners and the dealers in league against him.

In May, 1920, a bill was elaborated by the Cabinet. It provided for the abolition of the National Coal Association and for the transfer of its powers to the National Coal Councils; in addition the influence of the consumers was to be considerably increased within the National Coal Council. But the Constituent Assembly adjourned before this project could be examined by them.

Meanwhile a change was effected. It was agreed at the end of May, 1920, that decisions of the National Coal Association would thereafter not be operative unless they were made in agreement with a “Great Commission” of the National Coal Council. If agreement is not arrived at the matter must be brought before the National Coal Council itself which thereupon decides, its decision becoming binding upon the Association.

III.—But this reform did not suffice, and the question of a complete transformation of the regulation of the coal industry was submitted to a searching examination by the Committee on Socialization. One thing was unanimously agreed upon—the existing rÉgime could not continue. The Provisional Economic Council, in its meeting on July 24, the Cabinet of the Reich in the meeting of the Reichstag on August 5, and the Committee on Socialization declared that the coal industry must thereafter be completely subjected to the principles of collective economy; that the wage-earners and salaried employÉs in this industry must be included in the number of responsible directors of the industry; and that the profits obtained from the exploitation of the mines by private capital must be considerably decreased.

As for the practical means of realizing these recommendations the Committee on Socialization was not able to come to an agreement and submitted two different proposals.

The first, that of Lederer, signed by ten out of twenty-one members, demanded immediate expropriation and nationalization of all the mines. The owners of the mines would receive an indemnity in the form of bonds bearing a fixed interest, and the ownership of these mines would be transferred to an autonomous body, called “The German Coal Corporation.” This corporation is to be governed by the National Coal Council, which appoints a “directorate” to administer affairs. The right to appoint industrial heads, as well as the responsibility for the technical exploitation, passes to the National Coal Council and to the Directorate. Bonuses for production are to be given to directors, salaried employÉs and workers.

The authors of this proposition insist on the fact that they are not instituting state socialism for mines with all its attendant fiscal and bureaucratic dangers; and to emphasize what it is they are aiming at, they propose that the mines now owned by the Reich and by the States be taken away from them and transferred to the German Commonwealth of Coal.

Prices will be fixed by the Reich, to whose budgets will be accounted the profits of the exploitation—and undoubtedly the losses.

The second proposition, that of Rathenau and signed by eleven members out of twenty-one, does not go as far along the road of nationalization. The present owners of mines, according to this plan, provisionally retain their property, but their rights therein are strikingly reduced. The distribution and the sale of products cease to be guaranteed by the National Coal Association—which is, in fact, done away with—and are given over to the National Coal Council and to a Directorate, four out of five of whose members are elected by the Council; the fifth, the President, is appointed by the Minister of Public Economy.

The principal innovation consists in this. Whereas formerly the sale of coal was made on the basis of the individual exploitations, according to this project every mine transfers to the National Coal Council its whole output, and the net price is averaged according to the books. The National Council, therefore, has a monopoly on the wholesale trade and it fixes the selling prices. In addition to the net cost the Council credits to the mine (1) the cost of delivery and the interest and amortization of bonds of the enterprises; (2) the interest and amortization of new investments; (3) the normal fixed interest on the operating capital employed in the exploitations; (4) bonuses, fixed according to a schedule, for the increase of output of each exploitation; or deductions in case of decrease of output.

The National Council may demand the inauguration of new projects, or exploitations may propose improvements with the approval of the Council, provided that either the Council or the entrepreneur furnishes the necessary funds. Finally, in order to retain the free play of private initiative, an entrepreneur may, even in spite of the National Council, make investment but at his own risk and peril.

By these provisions the entrepreneur loses all interest in the increase of the price of coal, for commerce in it and commercial profits are denied to him. Also the fixing of high net prices does not serve him in any way, since his books are supervised by the properly empowered auditors of the National Council. The only way left him to make big profits is to improve his exploitation in its economic and social aspects. The interest or the profit which has hitherto ruled economy is retained in form, but it can no longer work except in the common interest. The situation of the manager will depend as to-day on an objective economic success.

The Cabinet of the Reich announced its intention of soon submitting a project of law which will adopt in outline the Rathenau proposition. Already the mine owners are discussing in the press the question of the “maturity” of the mines and the mode of calculating the cost of production. But above private interest there is a collective interest and the question will come up whether the system proposed by the Committee on Socialization and the Cabinet does not incur the risk of becoming more troublesome than profitable to the community itself.